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business > growing the business > Flashcards

growing the business Flashcards

2.1

1
Q

methods of business growth:

A
  • internal (organic)
  • external (inorganic)
  • internal sources of finance
  • external sources of finance
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2
Q

what is internal growth (organic)

A
  • new products
  • new markets
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3
Q

new products =

A
  • innovation
  • research and development
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4
Q

new markets =

A
  • through changing of marketing mix
  • taking advantage of technology
  • expanding overseas
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5
Q

external growth =

A
  • merger
  • takeover
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6
Q

type of business ownership for growing a business

A

public limited company (plc)

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7
Q

sources of finance for growing and establishing business

A
  • internal sources
  • external sources
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8
Q

internal sources of finance =

A
  • retained profit
  • selling assets
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9
Q

external sources of finance

A
  • loan capital
  • share capital
  • stock market flotation (plc)
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10
Q

why does a business whant to grow

A
  • increase market share
  • profit
  • revenue
  • franchise, expand
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11
Q

advantages of internal growth

A
  • low risk
  • maintain own values without interference of stakeholders
  • higher prouduction = economies of scale and lower average costs
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12
Q

basic advantages of internal growth

A
  • lower risk
  • build on businesses strengths
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13
Q

disadvantage of internal growth

A
  • slower
  • may be longer time between investment and return on investement
  • growth may be limited and is dependent on teh reliability of sales forcast
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14
Q

basic disadvantages of internal growth

A

slower

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15
Q

methods of external growth: horizontal integration

A
  • when two competitor join through merger or takeover -> new business becomes more competitive
    -> increase in market share
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16
Q

methods of external growth: forward vertical integration

A
  • a business takes control with another that operates at a later stage in teh supply chain
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17
Q

methods of external growth: backward vertical integration

A
  • business takes control of a business earlier in teh supply chain
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18
Q

methods of external growth: conglomerate integration

A
  • unrelated markets join through a takeover or merger
    -> businesses to spread their risk over a wide range of products and services
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19
Q

advantages of external growth

A
  • competition cna be reduced
  • market share can be increased quickly
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20
Q

disadvantages of external growth

A
  • expensive
  • managers may lack experience to deal with teh other businesses
21
Q

basic advantages of external growth

A
  • quick
  • expertise of both can be shared
  • access to customers from both businesses
22
Q

what is a plc

A
  • when shares are sold to the public on teh stock market
  • shareholder become part owners
  • take part of profit
23
Q

advantages of being a plc

A
  • able to raise aditional finance through share capital
  • limited liability
  • increased neogtiation opportunites with suppliers in terms of prices because larger businesses can achieve econmois of scale
24
Q

why does a business sell shares on stock exchange

A

could
- access large capital
-> supporting growth

25
Q

disadvantage of being a plc

A
  • expensive to set up
  • more complex accounting and reporting requierments
  • greater risk of hostile takeover by rival company
    *hostile takeover = takeover of one company by another that is aacomplisged without the agreemenet of the target companies managament
    -> the acquirer apporaches companies shareholders diereclty
26
Q

advantages of retained profit

A
  • cheap
  • quick and convenient
  • easy access to money
27
Q

disadvantages of retianed profit

A
  • once money is gone its not available for any future unforseen problems the business might face
28
Q

basic disdvantages of internal sources of finance

A
  • slow
  • amount is limited - depends on prfit
  • opporutinites could be missed
29
Q

advantages of selling assets

A
  • convenient
  • can create space for more profitable uses
  • quick
30
Q

disdavantages of sellign assets

A
  • might not get full market value of assets
  • or be able to sell assets
  • may also need the assets in teh future
31
Q

advantages of owners savings as internal sources of finance

A
  • cheap
  • quick
  • convenient
32
Q

disadvantages of owners savings

A
  • owner might not have enough savings or
  • may need the cash for personal use
33
Q

advantages of loan capital

A
  • regular payments are madae over a period of time
34
Q

disdvantages of loan capital

A
  • interest
  • can take a while to be approved and the business may not even qualify
  • banks may ask for collateral (security of repayment)
35
Q

advantages of share capital

A
  • not repaid
  • no interest
  • business cna choose to whom it offers shares
36
Q

disdvantages of share capital

A
  • profits made by the business are paid to the shareholders (dividends)
    -> so control gets diluted
37
Q

advanatge of stock market flotation

A
  • can raise large amounts of capital (as it is easy for public to buy shares)
  • no interest
  • shares do not have to be repaid
  • business cna gain recognition
38
Q

disdvantages of stock market flotation

A
  • can be complicated and expensice and psoibliyt of losing control as anyone can buy shares
  • profits are paid to shareholders
  • reocrds made public
  • risk that investors will only buy shares ot make quick profit by sellign them when the share price increases
39
Q

why do business aims and objectives change as the business evolves

A

as a response to
- market conditions
- technology
- performance
- legislation
- internal reasons

40
Q

how do business aims and objective change as the business evolves

A
  • focus on survival or growth
  • entering or exiting markets
  • growing or reducing the workforce
  • increasing or decreasing product range
41
Q

why does a business change its objectives and aims due to legislation

A
  • set of laws that specifically govern how they operate
    -> must comply with them
42
Q

examples of legislation that would affect business aims and objectives

A
  • minimum wage
  • health and safety
  • recruitment
  • equality act
  • safety at work act
  • payment
43
Q

why might a business want to grow by entering new markets

A
  • reach different demographics
    -> so develop a new target marekt
    -> so reach more customers
    -> more profit
44
Q

why might a business want to exit a market

A
  • poor perfomrance
  • shrinking market
  • new market opening up
  • business failing overall
    —– survival strategy
45
Q

retrecnhement

A
  • downsising operations
46
Q

why might a business reduce workforce (retrenchment)

A
  • not performing well
    -> survival strategy
    -» help reduce costs
    -»> get more profit
47
Q

why might a business decrease the product range (retrenchment)

A
  • not generating enough revenue
    -> allow them to focus on existing products
    -» or develop a new product range in different sector
    -»> to lower costs
    -»» gain profit
48
Q

why might a business increase the product range

A
  • to compete with other businesses
    -> helps manage risk
    -»because if product is not performing well the business can rely on its other products
    -»> to produce more revenue

business (3 decks)

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